The article explores the fate of unused gift cards, which despite being a popular holiday gift, often end up forgotten or neglected. While approximately 70% of gift cards are used within six months, billions of dollars’ worth remain unused. The article highlights the federal law, implemented in 2010, that prevents gift cards from expiring for at least five years. However, experts still advise prompt usage to avoid inactivity fees, loss of value due to inflation, or the risk of a retailer going bankrupt.
The piece also mentions the option of selling unwanted gift cards on resale sites to recoup a portion of their value. Furthermore, it sheds light on the financial implications for retailers, who calculate “breakage” and profit from unspent gift cards, with some states requiring the return of unclaimed funds to consumers. Readers are also informed of the existence of state unclaimed-property programs that allow individuals to search for and claim their unspent gift card funds.
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Gift Cards Loved, but lost
After clothing, gift cards will be the most popular present this holiday season. Nearly half of Americans plan to give them, according to the National Retail Federation. However, many of these gift cards will remain unspent. Whether they get lost or forgotten, or recipients hang on to them for a special occasion, a significant number of gift cards end up going unused. In a July survey, the consumer finance company Bankrate found that 47% of U.S. adults had at least one unspent gift card or voucher with an average value of $187, totaling to $23 billion.
The gift of time
Under a federal law that went into effect in 2010, a gift card can’t expire for five years from the time it was purchased or from the last time someone added money to it. Some state laws require an even longer period. For example, in New York, any gift card purchased after December 10, 2022, can’t expire for nine years. These varying expiration dates are one reason many stores have stopped using expiration dates altogether. Ted Rossman, a senior industry analyst at Bankrate, explains that differing state laws have led to this change in retail practices.
Use it or lose it
While gift cards may take years to expire, it is still wise to spend them quickly. Some cards, particularly generic cash cards from Visa or MasterCard, will start accruing inactivity fees if they’re not used for a year, which can eat away at their value. Additionally, inflation makes the value of gift cards decrease over time. Furthermore, if a retail store closes or goes bankrupt, a gift card could become worthless.
Considering these factors, it is advisable to clear out a gift card stash as soon as possible. National Use Your Gift Card Day, a holiday created by a public relations executive and now backed by multiple retailers, is a good opportunity to spend gift cards. The next one is scheduled for January 20, 2024.
Sell it
If someone doesn’t want to use a gift card, they have the option to sell it on a site like CardCash or Raise. While resale sites won’t give cardholders the full face value of their cards, they typically offer around 70 to 80 cents per dollar, which can still provide some value in return.
The money trail
When a gift card goes unused, what happens to the money loaded onto it depends on the state where the retailer is incorporated. Retailers can use the money from a gift card purchase right away, but it also becomes a liability for them. They have to plan for the possibility that the gift card will eventually be redeemed. Each year, large companies calculate “breakage,” which is the amount of gift card liability they believe won’t be redeemed based on historical averages. For some companies, like Starbucks, breakage becomes a significant source of profit. In 2022, Starbucks reported $212 million in revenue from breakage.
However, in at least 19 states, including Delaware where many big companies are incorporated, retailers must work with state unclaimed-property programs to return money from unspent gift cards to consumers. These programs aim to ensure that money that isn’t recovered by individual consumers is spent on public-service initiatives. According to state policies, unclaimed money from gift cards shouldn’t go to companies because they haven’t provided a service to earn it.
Claim it
All 50 states and the District of Columbia have unclaimed-property programs that collectively return around $3 billion to consumers annually. Misha Werschkul, the executive director of the Washington State Budget and Policy Center, explains that finding the holders of unspent gift cards can be challenging. However, the growing number of digital cards that name the recipient has made the process slightly easier. State unclaimed property offices jointly run the website MissingMoney.com, where consumers can search by name to check if they have any unclaimed property, which includes cash from unredeemed gift cards.
Conclusion
Gift cards continue to be popular presents, but a significant portion of them end up going unused. While federal and state laws provide protections against expiration, it is still advisable to spend gift cards quickly to avoid potential inactivity fees, loss of value due to inflation, or the risk of a retailer going out of business. Selling unwanted gift cards on resale sites can provide some value in return. As companies calculate breakage to their advantage, state unclaimed-property programs work to return unspent gift card money to consumers. Consumers can search for unclaimed gift card money through state-run programs and take advantage of National Use Your Gift Card Day to utilize their gift cards effectively.
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